Economics

A one-page flyer in PDF format, entitled “The Federal, State, and Local Price of the Drug War,” summarizes a number of the Facts in this section and can be found at http://mapinc.org/url/8Xg6AK9z.

Defining the five basic regulation models

Prescription
"The prescription model is the most tightly controlled and enforced drug supply model currently in operation. Under this model, drugs are prescribed to a named user by a qualified and licensed medical practitioner. They are dispensed by a licensed practitioner or pharmacist from a licensed pharmacy or other designated outlet."

Pharmacy model
"The pharmacy model, whilst still working within a clearly defined medical framework, is less restrictive and controlling than the prescription model. Pharmacists are trained and licensed to dispense prescriptions, although they cannot write them. They can also sell certain generally lower risk medical drugs from behind the counter."

Licensed sales
"Current best practice in licensed sales of alcohol and tobacco offers a less restrictive, more flexible infrastructure for the licensed sales of certain lower risk non-medical drugs (see: 5.1 Alcohol, page 100, and 5.2 Tobacco, page 105). Such a system would put various combinations of regulatory controls in place to manage the vendor, the supply outlet, the product and the purchaser, as appropriate."

Licensed premises
"Public houses and bars serving alcohol offer the most common example of premises licensed for sale and consumption. Under this long established system, various controls exist over the venue and (in particular) the licensee."

Unlicensed sales
"Certain psychoactive substances deemed sufficiently low risk, such as coffee, traditional use of coca tea and some low strength painkillers, are subject to little or no licensing. Here, regulation focuses on standard product descriptions and labelling."

"Prohibition has two effects: on one hand it raises supplier costs, disrupts market functioning and prevents open promotion of the product; on the other, it sacrifices the authorities’ ability to tax transactions and regulate operation of the market, product characteristics and promotional activity of suppliers. The cannabis prevalence rates presented in Figure 1 show clearly that prohibition has failed to prevent widespread use of the drug and leaves open the possibility that it might be easier to control the harmful use of cannabis by regulation of a legal market than to control illicit consumption under prohibition. The contrast between the general welcome for tobacco regulation (including bans on smoking in public places) and the deep suspicion of prohibition policy on cannabis is striking and suggests that a middle course of legalised but limited consumption may find a public consensus."

Economics - Data - Global

(2009 - value of global opiate market) "At retail level, the total value of the heroin market is substantial at an estimated US$55 billion. The size of the annual opium market is a more ‘modest’ US$7-10 billion. Consequently, the combined total opiates (heroin/opium) market could be worth up to US$65 billion per year. This amount is higher than the GDPs of many countries. In economic terms, nearly half of the overall opiate market value is accounted for by Europe (some US$20 billion) and the Russian Federation (US$13 billion). Other lucrative markets include China (US$9 billion) and the United States and Canada (US$8
billion)."

(2005-2009 - cost of U.S counternarcotics programs in Afghanistan) "The U.S. Government has been involved in counternarcotics in Afghanistan for over 20 years through various agreements to suppress the production, distribution, and use of illicit drugs and has spent approximately $2 billion on counternarcotics programs in the last 5 years."

(2009) "Of the US$ 65 billion turnover of the global market for opiates, only 5-10 per cent (US$ 3-5 billion) are estimated to be laundered by informal banking systems. The rest is laundered through legal trade activities (including smuggling of legal goods into Afghanistan) and the banking system."

(2008) "Mexico also remains a hub for money laundering. It is estimated that DTOs’ [drug trafficking organizations] annual gross revenue ranges between $15-30 billion from illicit drug sales in the U.S. Most of these proceeds are returned from the U.S. primarily through bulk currency shipments and laundered through legitimate Mexican businesses."

(2008) "The main opiate consumer market is Europe (about 19 per cent of global consumption, with a market value of US$ 20 billion), the Russian Federation (15 per cent), the Islamic Republic of Iran (15 per cent), China (12 per cent), India (7 per cent), Pakistan (6 per cent), Africa (6 per cent) and the Americas (6 per cent)."

(2008) "When the Taliban were in power (in the late 1990s) they extracted US$ 75-100 million a year from taxing opium. In the 2005-2008 period the cumulative revenue from opiate farming and trade accruing to Taliban insurgents is estimated at US$ 350-650 million, or an annual average of US$ 90-160 million in Afghanistan alone. This estimate does not include insurgents’ potential revenues from other drug-related activities (labs, imports of precursors) in Afghanistan and from the US$1 billion opiate trade in Pakistan."

(2008) "The new estimate of drug-related public expenditure in Europe is EUR 34 billion (95% confidence interval, EUR 28–40 billion), which is equivalent to 0.3% of the combined gross domestic product of all EU Member States. This suggests that State expenditure on the drug problem costs the average EU citizen EUR 60 a year."

(2007 - price of heroin) In 2007, a kilogram of heroin no. 3 typically sold for an average wholesale price of $2,520 in Pakistan; the average 2005 per-kilogram wholesale price of heroin no. 4 in that country equaled approximately $4,159. The 2007 wholesale price for a kilogram of heroin in Afghanistan ranged around $2,405. In Colombia, a kilogram of heroin no. 4 typically sold for $9,992 wholesale in 2006. In the United States in 2007, a kilogram of heroin no. 4 cost an average of $71,200 wholesale.

(2006 - Canadian dollar cost of substance abuse) "In 2006 a team of researchers published estimates of the social costs of substance abuse in Canada across several domains based on 2002 data (Rehm et al., 2006). Total costs of substance abuse for all substances (including tobacco) were estimated to be $39.8 billion in 2002, which translates into $1,267 per capita. Of this, approximately 39% are direct costs to the economy associated with health care, enforcement, prevention/research and “other costs”⁶, and 61% are indirect costs associated mainly with productivity losses resulting from premature death and disability.

"Important findings ... include the fact that (1) total direct social costs associated with alcohol ($7,427.5 million) are more than double those for all illicit drugs combined ($3,565.5 million); (2) direct alcohol-related health care costs ($3,306.2 million) are nearly three times as high as for all illicit drugs, excluding cannabis ($1,061.6 million), and over 45 times higher than the direct health care costs of cannabis ($73 million); and (3) annual direct costs for health care ($4,440.7 million) are 31 times higher, and annual direct costs for enforcement ($5,407.7 million) are 36 times higher than annual costs for prevention and research ($147.6 million)."

(2000-2005) "However, during fiscal years 2000-2005, the United States provided about $6.2 billion to support counternarcotics and related programs in the source and transit zones (see table 1).¹² In the source zone, U.S. assistance supports eradication and interdiction efforts and related programs for alternative development and judicial reform, primarily in Bolivia, Colombia, and Peru. In the transit zone, the United States provided about $365 million in assistance—primarily to El Salvador, Guatemala, Haiti, and Mexico —to support interdiction and other law enforcement programs."

"For fiscal year 2006, the Administration has requested an additional $735 million for countries in the source zone and $77 million for countries in the transit zone."

"From fiscal year 2000 through 2005, the United States provided about $365 million in assistance to countries in the transit zone. Of this, Mexico received approximately $115 million to support its efforts to eradicate opium poppy and marijuana, and improve surveillance and intelligence capabilities."

(2004 - price of cocaine) In 2004, a kilogram of cocaine base in Colombia typically sold for $810 and a kilogram of cocaine typically sold for $1,713. In Peru in 2004, a kilogram of cocaine base typically sold for $700 and a kilogram of cocaine typically sold for $1,000. In Mexico in 2004, a kilogram of cocaine typically sold for $7,880. In the United States in 2001, a kilogram of cocaine typically sold for $23,500.

(2003) "The UNODC (2005) estimates that the world retail market for cannabis was about €125 Billion⁴ circa 2003; more than the retail markets for cocaine and opiates combined. The US is believed to be the largest contributor to this estimate, but the exact size of that market is far from settled. Indeed, some of the estimates of the US market vary by a factor of 10.

"The UNODC’s macro estimates indicate that North America and Western/Central Europe account for 45% and 28% of the world cannabis market, respectively. The UNODC’s input-output model suggests that each past year user in North America consumed 165 grams of cannabis herb at almost €10 per gram. With approximately 25 million past-year users in the US during this time, the UNODC calculations imply that retail cannabis expenditures in the US exceeded €40 billion. This is more than four times the retail estimate generated by the White House’s Office of National Drug Control Policy for 2000." [all monetary values are in €2005]

(2003) "If compared to global licit exports (US$7,503 bn in 2003) or compared to global GDP (US$35,765 bn in 2003) the estimated size [of] the global illicit drug market may not appear to be particularly high (0.9% of global GDP at retail level or 1.3% of global exports measures at wholesale level).

"Nonetheless, the size of the global illicit drug market is substantial. The value, measured at retail prices, is higher than the GDP of 88% of the countries in the world (163 out of 184 for which the World Bank has GDP data) and equivalent to about three quarters of Sub-Saharan Africa's combined GDP (US$439 bn in 2003). The sale of drugs, measured at wholesale prices, was equivalent to 12% of global export of chemicals (US$794 bn), 14% of global agricultural exports (US$674 bn) and exceeded global exports of ores and other minerals (US$79 bn) in 2003. Such sales of drugs were also higher than the combined total licit agricultural exports from Latin America (US$75 bn) and the Middle East (US$10 bn) in 2003."

(2003) According to the United Nations Office on Drugs and Crime, "[T]he value of the global illicit drug market for the year 2003 was estimated at US$13 bn [billion] at the production level, at $94 bn at the wholesale level (taking seizures into account), and at US$322bn based on retail prices and taking seizures and other losses into account. This indicates that despite seizures and losses, the value of the drugs increase substantially as they move from producer to consumer."

(1999) "It is also worth noting that by 1999, the UNDCP had not attempted to follow up its efforts to estimate the size of the world illegal drug market. That year, the Financial Action Task Force (FATF) [an inter-governmental body focusing on anti-money laundering activities and legislation] decided to begin work to assess the size of the world illegal economy and found it convenient to start with an estimate of the illegal drug market, a task that was considered easier than estimating other illegal activities, given the large work on drugs already available. FATF hired Peter Reuter, a well-known economist who has done extensive work on illegal drug markets, and produced an estimate. This job had the full cooperation of the UNDCP, which opened its data bank to the researcher.

The resulting study is probably the most serious attempt to ascertain the size of the world illegal drug market and resulted in an estimated range between $45 and $280 billion."

(1991-2000) "The value of illegal drug exports from the Caribbean during the past two decades has fallen into two very well differentiated periods. The first period, from 1981 to 1990, was an epoch of impressive depression in the total value of the Caribbean drugs exports -- from an income over US$20bn at its peak in 1983 to US$5bn in 1991. Since 1991, the value of Caribbean exports of illegal drugs has stabilised around US$5bn."

Economics - Data - United States

(2010 - U.S. drug control budget) "For FY 2011, $85,500,000 is requested to support the DFC Program [Drug Free Communities]. Of this amount, $76,660,000 will fund grants made directly to nearly 620 community-based coalitions focusing on preventing and reducing youth substance abuse throughout the United States. The remaining amount will be divided with $2,000,000 to be used to provide a directed grant award to the National Anti-Drug Coalition Institute (Institute). The Institute is the primary source of training and technical assistance to DFC coalitions and coalitions working toward submitting a successful DFC application. The remaining $6,840,000 will fund program support costs, such as program staff, daily oversight of grants and the DFC National Cross-Site Evaluation."

(2010 - economic benefit of drug legalization)
"• The report estimates that legalizing drugs would save roughly $48.7 billion per year in government expenditure on enforcement of prohibition. $33.1 billion of this savings would accrue to state and local governments, while $15.6 billion would accrue to the federal government. Approximately $13.7 billion of the savings would results from legalization of marijuana, $22.3 billion from legalization of cocaine and heroin, and $12.8 from legalization of other drugs.

"• The report also estimates that drug legalization would yield tax revenue of $34.3 billion annually, assuming legal drugs are taxed at rates comparable to those on alcohol and tobacco. Approximately $6.4 billion of this revenue would result from legalization of marijuana, $23.9 billion from legalization of cocaine and heroin, and $4.0 billion from legalization of other drugs."

(2010) "For the period October 1, 2010 through September 30, 2011, ONDCP is requesting $401,446,000 and 99 full-time equivalents (FTE). The FY 2011 budget request reflects three appropriations: the Salaries and Expenses (S&E); Other Federal Drug Control Programs; and, High Intensity Drug Trafficking Areas (HIDTA).

"The FY 2011 request for S&E is $26,196,000 and 98 FTE. The budget request includes $24,961,000 for operational expenses and $1,235,000 for Policy Research.

"The FY 2011 request for the Other Federal Drug Control Programs is $165,300,000 and 1 FTE. This request includes funds for National Youth Anti-Drug Media Campaign; Drug-Free Communities Program; Performance Measures Development; Anti-Doping Activities; the World Anti-Doping Agency dues; National Drug Court Institute; and, National Alliance for Model State Drug Laws.

"The FY 2011 request for HIDTA is $209,950,000. This request includes $207,250,000 for grants and Federal transfers and up to $2,700,000 for HIDTA auditing services and associated activities."

(2009) "The FY 2009 resources of $1.250 million will support NDCI’s [National Drug Court Institute] efforts to improve and expand drug courts through its research, training, and technical assistance programs. NDCI will conduct research and produce reports on successful methods of financing and sustaining drug courts. The program will also provide technical assistance to court systems wishing to adopt these methods. NDCI will use resources to continue to develop and encourage standard drug court data collection practices, which allow for comparisons across drug court systems."

(2008) "The average cost of intercept devices installed in 2008 was $47,624, down 2 percent from the average cost in 2007. For federal wiretaps for which expenses were reported in 2008, the average cost was $70,536, a 7 percent increase from the average cost in 2007. The average cost of a state wiretap declined 6 percent to $41,154 in 2008."

Applying the average cost of $70,536 for installing federal wiretapping devices and $41,154 for installing state devices to the respective 386 federal and 1,505 state wiretaps in 2008 -- and noting that 84% of wiretaps involve drug investigations -- brings the estimated 2008 spending for the installation of wiretap device for drug investigations to $22.8 million by the federal government and $52 million by the states. These costs exclude manpower and prosecution.

(2008) "The report estimates that legalizing drugs would save roughly $48.7 billion per year in government expenditure on enforcement of prohibition. $33.1 billion of this savings would accrue to state and local governments, while $15.6 billion would accrue to the federal government. Approximately $13.7 billion of the savings would results from legalization of marijuana, $22.3 billion from legalization of cocaine and heroin, and $12.8 from legalization of other drugs."

(2008) "Each year, drug-related deaths number in the thousands, and treatment admissions and emergency department (ED)visits both exceed a million. These and other consequences of drug abuse, including lost productivity associated with abuse, the impact on the criminal justice system, and the environmental impact that results from the production of illicit drugs, are estimated at nearly $215 billion³ annually."

(2007) "...the estimated cost of CPD diversion and abuse to public and private medical insurers is $72.5 billion a year,³ much of which is passed to consumers through higher health insurance premiums. Additionally, the abuse of prescription opioids is burdening the budgets of substance abuse treatment providers, particularly as prescription opioid abuse might be fueling heroin abuse rates in some areas of the United States."

(2007) "Aviation units (190) reporting actual expenditures for 2007 spent approximately $283 million to purchase, lease or finance, maintain, and fuel their aircraft (table 4). Total expenditures for all 201 aviation units were estimated at $301 million in 2007."

Since 89% of all aviation units participate in "Counternarcotics operations," total unit spending attributable this activity would approximate $268 million.

(2007) According to the American Corrections Association, the average daily cost per state prison inmate per day in the US is $67.55. State prisons held 253,300 inmates for drug offenses in 2007. That means states spent approximately $17,110,415 per day to imprison drug offenders, or $6,245,301,475 per year.

(2006 - prescription drug diversion) "According to law enforcement reporting, some individuals and criminal groups divert CPDs [controlled prescription drugs] through doctor-shopping and use insurance fraud to fund their schemes. In fact, Aetna, Inc. reports that nearly half of its 1,065 member fraud cases in 2006 (the latest year for which data are available) involved prescription benefits, and most were related to doctor-shopping, according to the Coalition Against Insurance Fraud (CAIF). CAIF further reports that diversion of CPDs collectively costs insurance companies up to $72.5 billion annually, nearly two-thirds of which is paid by public insurers. Individual insurance plans lose an estimated $9 million to $850 million annually, depending on each plan’s size; much of that cost is passed on to consumers through higher annual premiums."

(2006) "Retail sales of imported hemp products exceeded $70 million in the United States in 2006.⁶² Given hemp’s wide-ranging utility, supporters of domestic cultivation estimate that it would create a $300 million dollar industry.⁶³"

(2005) "In 2005, federal, state and local governments spent at least $467.7 billion on substance abuse and addiction."

"Federal and state* governments spent $3.3 trillion in 2005 to operate government and provide public services such as education, health care, income assistance, child welfare, mental health, law enforcement and justice services, transportation and highway safety. Hidden in this spending was a stunning $373.9 billion--11.2 percent--that was spent on tobacco, alcohol and other drug abuse and addiction. A conservative estimate of local government spending on substance abuse and addiction in 2005 is $93.8 billion.

"The vast majority of federal and state substance related spending--95.6 percent or $357.4 billion--went to carry the burden to government programs of our failure to prevent and treat the problem while only 1.9 percent was spent on preventing or treating addiction. Another 0.4 percent was spent on research and the remaining two percent was spent on alcohol and tobacco tax collection, regulation and operation of state liquor stores (1.4 percent) federal drug interdiction (0.7 percent). For every dollar the federal and state governments spent on prevention and treatment, they spent $59.83 shoveling up the consequences.

"A staggering 71.1 percent of total federal and state spending on the burden of addiction is in two areas: health and justice. Almost three fifths (58.0 percent) of federal and state spending on the burden of substance abuse and addiction (74.1 percent of the federal burden) is in the area of health care where untreated addiction causes or contributes to over 70 other diseases requiring hospitalization. The second largest area of substance-related federal and state burden spending is the justice system (13.1 percent)."

(2003) "The increase in justice expenditures over nearly 20 years reflects the expansion of the Nation's justice system. For example, in 1982 the justice system employed approximately 1.27 million persons; in 2003 it reached over 2.3 million.

"Police protection
"One indicator of police workload, the FBI's arrest estimates for State and local police agencies, grew from 12 million in 1982 to an estimated 13.6 million in 2003. The number of employees in police protection increased from approximately 724,000 to over 1.1 million.

"Judicial and legal
"The judicial and legal workload, including civil and criminal cases, prosecutor functions, and public defender services, also expanded during this period. Cases of all kinds (criminal, civil, domestic, juvenile, and traffic) filed in the nearly 16,000 general and limited jurisdiction State courts went from about 86 million to 100 million in the 16-year period, 1987-2003. The total of judicial and legal employees grew about 101% to over 494,000 persons in 2003.

"Corrections
"The total number of State and Federal inmates grew from 403,000 in 1982 to over 1.4 million in 2003. The number of local jail inmates more than tripled from approximately 207,000 in 1982 to over 691,000 in 2003. Adults on probation increased from over 1.4 million to about 4.1 million persons. Overall, corrections employment more than doubled from nearly 300,000 to over 748,000 during this same period."

(2003) "In 2003 the United States spent a record $185 billion for police protection, corrections, and judicial and legal activities. Expenditures for operating the Nation's justice system increased from almost $36 billion in 1982 to over $185 billion in 2003, an increase of 418%"

(1981-2003) "In summary, prices for powder cocaine, crack, and heroin declined sharply in the 1980s and have declined more gradually since then, with periodic interruptions by modest price spikes that have usually persisted for a year or less. For d-methamphetamine, the pattern is broadly similar, but the price spikes appear to be larger and longer-lasting, particularly for 1989–1991. Marijuana prices have followed a very different pattern, increasing from 1981 to 1991, then declining through 2000 and increasing over the past three years."

(2001) "Correctional authorities spent $38.2 billion to maintain the Nation’s State correctional systems in fiscal year 2001, including $29.5 billion specifically for adult correctional facilities. Day-to-day operating expenses totaled $28.4 billion, and capital outlays for land, new building, and renovations, $1.1 billion.

"The average annual operating cost per State inmate in 2001 was $22,650, or $62.05 per day. Among facilities operated by the Federal Bureau of Prisons, it was $22,632 per inmate, or $62.01 per day."

In constant dollars, expenditures for "Total State Corrections" were about 2.5 times higher in 2001 than they were in 1986, with the cost per state resident going from $65 in 1986 to $134 in 2001.

(1999) "The most recent figures available from the Office of National Drug Control Policy (ONDCP) indicate that, in 1999, federal expenditures on control of illegal drugs surpassed $17 billion; combined expenditures by federal, state, and local governments exceeded $30 billion. What is more, the nation's so-called 'drug war' is a protracted one. The country has spent roughly this amount annually throughout the 1990s."

(1999) "Studies have shown the annual cost of substance abuse to the Nation to be $510.8 billion in 1999 (Harwood, 2000). More specifically,

"• Alcohol abuse cost the Nation $191.6 billion;
"• Tobacco use cost the Nation $167.8 billion;
"• Drug abuse cost the Nation $151.4 billion.

"Substance abuse clearly is among the most costly health problems in the United States. Among national estimates of the costs of illness for 33 diseases and conditions, alcohol ranked second, tobacco ranked sixth, and drug disorders ranked seventh (National Institutes of Health [NIH], 2000)."

(1998) "The final component of state substance abuse spending is the $433 million states spent in 1998 to regulate the sale of alcohol and tobacco and to collect alcohol and tobacco taxes (Table 5.1) Tax rates vary significantly from state to state and revenues generally are not dedicated to prevent, treat or cope with the burden substance abuse and addiction places on many state programs. "In 1998, states collected $4.0 billion in alcohol and $7.4 billion in tobacco taxes for a total of $11.4 billion. For every dollar of such tax revenues, states spent $7.13 on substance abuse and addiction -- $6.83 to shoulder the burden on public programs, $0.26 for prevention and treatment, and $0.04 to collect alcohol and tobacco taxes and run licensing boards."

(1998) "The justice system spends $433 million on treatment: $149 million for state prison inmates; $103 million for those on probation and parole; $133 million for juvenile offenders; $46 million to help localities treat offenders; $1 million on drug courts. Treatment provided by mental health institutions for co-morbid patients totals $241 million. The remaining $492 million is for the substance abuse portion of state employee assistance programs ($97 million), treatment programs for adults involved in child welfare services ($4.5 million) and capital spending for the construction of treatment facilities ($391 million). (Figure 4.B)"

(1998) "In our study, the total cost for patients with an ADR [adverse drug reaction] increased an average of $2401/patient (19.86% increase), or an additional $339,496,598 for all study patients. Extrapolating this finding to the entire Medicare population resulted in $516,034,829 in costs associated with ADRs. In a recent single-site study of ADEs [adverse drug events] from the same time frame, ADE occurrence resulted in an additional $3344/hospital stay.^[10] Thus, an ADE costs about one third more than an ADR.

"Drug costs for patients with an ADR increased an average of $175/patient (9.15% increase), or an additional $24,744,650 for all study patients. Extrapolating this finding to the entire Medicare population resulted in additional drug costs of $37,611,868 associated with ADRs. Laboratory costs for patients with an ADR increased an average of $44/patient (2.82% increase), or an additional $6,221,512 for all study patients. Extrapolating this finding to the entire Medicare population resulted in $9,456,698 in costs associated with ADRs.

"For the 12,261,737 Medicare patients admitted to U.S. hospitals, ADRs were projected to cause the following increases: 2976 deaths, 118,200 patient-days, $516,034,829 in total costs, $37,611,868 in drug charges, and $9,456,698 in laboratory charges. The incentives for health care professionals to develop better systems and increase personnel awareness regarding ADRs are compelling.

"Assuming that up to 50% of the 74,380 ADRs and 986 deaths reported in our study were avoidable, these findings have significant medical and legal implications.^[10] Fatal ADEs that resulted in legal judgments or settlements cost an additional $1.1 million/death.^[20] In one report, ADEs that caused permanent disability and resulted in legal judgments or settlements cost an additional $4.3 million/patient.^[21] Also, 13% of patients who experienced an ADE that led to litigation received average settlements and judgments of $3.1 million/patient.^[22]

Applying the 13% figure to the 22.35 ± 33.41 patients/hospital/year who experienced an ADR (50% of ADRs potentially avoidable)^[10] resulted in litigation for 2.91 patients/hospital/year, or $9,007,050/hospital/year in legal settlements and judgments. Extrapolating to the 3328 hospitals in our study resulted in $29,975,462,400/year allocated to settlements and judgments associated with ADRs. These figures probably are conservative, since the data were self-reported and likely undercount significantly the number of ADRs occurring in U.S. hospitals. Clearly, reducing ADRs would result in significant savings beyond the costs to individual patients and the Medicare system."

(1992) "Domestic enforcement costs 4 times as much as treatment for a given amount of user reduction, 7 times as much for consumption reduction, and 15 as much for societal cost reduction."

(1992) A study by the RAND Corporation found, "the savings of treatment programs are larger than the control costs; we estimate that the costs of crime and lost productivity are reduced by $7.46 for every dollar spend on treatment."

Economics - Data - State and Local

"• Overall, local police spending represented 45% of the Nation's total justice expenditure, and State corrections accounted for the second largest portion, 33%.
"• Police protection is primarily a local responsibility; accordingly, local governments spent 69% of the total police protection expenditure in the country in 2003.
"• Corrections is primarily a State responsibility; as such State governments accounted for 64% of the Nation's corrections expenditure.
"• Judicial and legal services in the United States were funded primarily by local (43%) and State (38%) governments."

(2009) "Based on the estimated 16 million ounces of annual consumption in California and several assumptions (which are summarized in the Qualifying Remarks section), the revenue effect of the bill [California AB 390] is an estimated total annual revenue gain of $1.4 billion, as follows:

• $990 million from the proposed $50 per ounce levy on retail sales of marijuana
• $392 million in sales tax revenues"

(2008) "State spending for corrections totaled $52 billion in fiscal 2008, a 6.5 percent increase compared to the previous year. State spending on corrections in fiscal 2009 is estimated to total $53 billion, a 1.8 percent increase from fiscal 2008."

"In fiscal 2008, corrections spending represented 3.5 percent of total state spending and 7 percent of general fund spending. General fund dollars are used primarily to fund state corrections spending and account for $47.7 billion, or 91.8 percent, of all fiscal 2008 state corrections spending. State funds (general funds and other state funds combined, but excluding bonds) accounted for 96.6 percent of total state corrections spending in fiscal 2008. Bonds accounted for 1.8 percent and federal funds accounted for 1.6 percent. In fiscal 2009, state funds are estimated to remain by far the largest source of total state correction spending at 95.7 percent. However, the growth rate of state funds in fiscal 2009 is much smaller than the growth rate of federal funds, with state funds growing 0.9 percent and federal funds growing 18.5 percent. Part of this is attributable to the increased federal funds included in the American Recovery and Reinvestment Act of 2009 (ARRA)."

(2008) "Approximately 93,000 young people are held in juvenile justice facilities across the United States.¹ Seventy percent of these youth are held in state-funded, postadjudication, residential facilities, at an average cost of $240.99 per day per youth.²" (Total cost = $22.4 million per day or $8.1 billion per year)

(2008) "In 2007, there were 1,922 arrests for first-time marijuana possession in Rhode Island. In 2008, there were 584 incidents of incarceration for marijuana possession.¹ Ending prohibition and eliminating these arrests would save the state approximately $12.7 million in criminal justice costs."

(2003) "In 2003, 7.2% of total State and local expenditures was for justice activities – 3% for police protection, 2.6% for corrections, and 1.5% for judicial and legal services (figure 3).

"By comparison, 29% of State and local government spending went to education, 14% to public welfare, 7% to health and hospitals, and 4% to interest on debt."

"Substance abuse treatment is more cost-effective than prison or other punitive measures. The Washington State Institute for Public Policy (WSIPP) found that drug treatment conducted within the community is extremely beneficial in terms of cost, especially compared to prison. Every dollar spent on drug treatment in the community is estimated to return $18.52 in benefits to society."

(1998) "Of the $3 billion states spend on prevention, treatment and research, $920 million (30.7 percent) is spent by state health agencies; $843 million (27.9 percent) by state alcohol and drug abuse offices; $433 million (14.3 percent) by the justice system."

(1998) "States report spending $2.5 billion a year on treatment. States did not distinguish whether the treatment was for alcohol, illicit drug abuse or nicotine addiction. Of the $2.5 billion total, $695 million is spent through the departments of health and $633 million through the state substance abuse agencies. We believe that virtually all of these funds are spent on alcohol and illegal drug treatment."

(1998) "State spending for substance abuse in the justice system amounts to over one-third (39.4 percent) of the $77.9 billion states spend on the burden of substance abuse to state programs – 10 times the amount states spend on all substance abuse prevention, treatment and research."

(1998) "Of the $81.3 billion states spent on substance abuse in 1998, $77.9 billion were spent shoveling the wreckage of this enormous health and social problem. These clean-up costs equal 12.6 percent of the total $620 billion in state spending for 1998. (Table 3.1)

"Almost ninety-six (95.8) cents of every state dollar spent on substance abuse goes to carry its burden in state programs such as criminal justice, school aid, Medicaid, child welfare, developmental disabilities and mental illness because of our failure to prevent substance abuse and treat those who are abusers and addicts."

(1998) In January 2001, the National Center on Addiction and Substance Abuse at Columbia University published an analysis of costs to states from tobacco, alcohol and other drug addiction. According to the report,

"CASA's analysis revealed a few cost categories where only a single category of substances is implicated. (Figure 2.B) For instance, CASA identified $1.1 billion in state spending linked to illicit drug use only: $574 million for public safety costs for drug enforcement programs; $114 million for drug courts; and $412 million linked to illegal drugs in state spending on Medicaid.

"CASA estimates that $7.4 billion in state spending is linked exclusively to tobacco through state Medicaid spending.

"The single drug linked to the largest percentage of state costs is alcohol. We were able to identify $9.2 billion in state spending linked to only to alcohol in addition to the costs associated with abuse of both alcohol and illegal drugs: $915 million on highway safety and local law enforcement associated with drunk driving; $837 million in state costs for the developmentally disabled as a result of fetal alcohol syndrome; and, $7.4 billion in state Medicaid costs."

(1998) "Only $513.3 million in state funds is spent nationwide on substance abuse prevention. This includes $223 million through the department of health, $210 million through the department of substance abuse and $80 million in prevention in elementary and secondary education. Most spending for prevention through the schools is federally funded and that amount is not included here."

(1998) "States spent $29.8 billion in 1998 for adult corrections including incarceration, probation and parole. Eighty-one percent of this amount ($24.1 billion) was spent on substance-involved offenders. Of the $24.1 billion, $21.4 billion went to run and build prisons to house substance-involved offenders, $1.1 billion for parole and $695 million for probation for substance-involved offenders. An additional $899 million was spent on state aid to localities for substance-involved offenders."

Economics - Research

According to a study funded by the Robert Wood Johnson Foundation and published by the Southern Economic Journal in 2001, "Nonchronic drug use was not statistically related to either of the labor supply measures, indicating that light or casual drug use did not lead to negative effects on the labor supply."

"Although residents of disadvantaged neighborhoods, neighborhoods with high concentrations of minorities, and neighborhoods with high population densities reported much higher levels of visible drug sales, they reported only slightly higher levels of drug use, along with somewhat higher levels of drug dependency. This finding indicates that conflating drug sales with use, so that poor and minority areas are assumed to be the focus of the problem of drug use, is plainly wrong. The finding is based on the data collected across 41 sites, including city and suburban (but not rural) areas in all regions."

"The long-run elasticities provide a basis for estimating potential benefits from changing the current policy mix away from enforcement and interdiction and towards education and treatment. Applying the estimated coefficients, a 10 percent reduction in expenditures on enforcement (about 1 billion dollars by the late 1990s) would be associated with a long-run reduction of over 20% in both the number of deaths and the age-adjusted death rate. This would imply that close to 3,000 deaths a year might be avoided with a shift away from enforcement approaches to drug control. Adding the billion dollars to education and treatment would represent an 18% increase in 1998. The estimated elasticity of 1.59 implies a reduction of close to 5,000 drug-induced deaths per year as a result. Thus, the underlying estimates suggest that very substantial improvements in public health may be achieved by emphasizing education and treatment over enforcement and interdiction."

"Although serious drug use is slightly more prevalent in poor minority neighborhoods than elsewhere, the major problem for disadvantaged neighborhoods is drug distribution. These communities are victims not only of their own drug abuse but also of a criminal drug market that serves the entire society. The market establishes itself in disadvantaged communities in part because of the low social capital in these neighborhoods. The drug economy further erodes that social capital."

(drug dealing and employment) The average "dealer" holds a low-wage job and sells part-time to obtain drugs for his or her own use. "Earnings for drug selling were positively correlated (though weakly) with legitimate earnings. Drug selling seemed to be a complement to, rather than a substitute for, legitimate employment."

"Every dollar transferred to a 'prison community' is a dollar that is not given to the home community of a prisoner, which is often among the country's most disadvantaged urban areas. According to one account, Cook County Illinois will lose nearly $88 million in federal benefits over the next decade because residents were counted in the 2000 Census in their county of incarceration rather than their county of origin (Duggan 2000). Losing funds from the 'relocation' of prisoners is also an issue for New York City, as two-thirds of state prisoners are from the city, while 91 percent of prisoners are incarcerated in upstate counties (Wagner 2002a)."

"The economic benefits of new prisons may come from the flow of additional state and federal dollars. In the decennial census, prisoners are counted where they are incarcerated, and many federal and state funding streams are tied to census population counts. According to the U.S. General Accounting Office (2003), the federal government distributes over $140 billion in grant money to state and local governments through formula-based grants. Formula grant money is in part based on census data and covers programs such as Medicaid, Foster Care, Adoption Assistance, and Social Services Block Grant (U.S. General Accounting Office 2003). Within a state, funding for community health services, road construction and repair, public housing, local law enforcement, and public libraries are all driven by population counts from the census."

"The few studies on the local economic impacts of prisons to date have not found significant positive impacts. For example, a study by the Sentencing Project challenges the notion that a new prison brings economic benefits to smaller communities. Using 25 years of data from New York State rural counties, the authors looked at employment rates and per capita income and found 'no significant difference or discernible pattern of economic trends' between counties that were home to a prison and counties that were not home to a prison (King, Mauer, and Huling 2003). According to a recent study by Iowa State University, many towns that made sizeable investments in prisons did not reap the economic gains that were predicted (Besser 2003). Another analysis in Texas found no impacts as measured by consumer spending in nearly three-fourths of the areas examined (Chuang 1998)."

Research assessing the impact of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) found that the termination of addiction disability payments has had a negative effect.

According to the study, "While the aim of SSI addiction disability termination was, for conservatives, to force individuals to take greater responsibility in their lives and to decrease dependence on governmentally funded programs, this goal appears nearly impossible to achieve given the lack of resources had by this under-skilled and poor population. Nor did the policy change necessarily decrease their risk of continued involvement in drugs and crime. We estimate that losing a stable housing situation has placed respondents at greater risk for continued drug and alcohol use, something not considered by extant etiological work on individual substance abuse. These consequences could mean a greater dependence of this population on state and federally funded programs."

"First, PRWORA of 1996 has destabilized the housing situations of the respondents and has placed them at greater risk for various types of housing problems and homelessness. Second, these housing complications have exacerbated numerous social problems (drug and alcohol abuse, crime, and victimization). It is important to consider, however, that changes in the housing market, decreased housing subsidies, and individual characteristics and behaviors also played a role in these negative outcomes.

"More specifically, we found considerable housing dependency, at some level, for all respondents, albeit most often among those who currently had no SSI benefits. Problematic dependence on family, friends, and significant others (doubling up or sharing housing with other adults) was most common, followed by dependence on state-funded program. Independent living (e.g., having one's own place and paying one's own rent), which we would hope for most by middle-age, was an uncommon occurrence."

"A qualitative analysis, featuring in-depth interviews with 101, nonrandomly selected former recipients revealed that disability benefits promoted housing autonomy, successful cohabitation, and overall housing stability. The termination of benefits, at a time of diminishing social services (e.g., cash and housing assistance) and a housing market explosion, increased various types of homelessness for respondents and dependency on family and friends. Such negative living outcomes, in turn, further escalated the risk of drug and alcohol use, criminal participation, and victimization."

In a report funded by the Wisconsin Policy Research Institute, researchers concluded that "drug sales in poor neighborhoods are part of a growing informal economy which has expanded and innovatively organized in response to the loss of good jobs." The report characterizes drug dealing as "fundamentally a lower class response [to the information economy] by men and women with little formal education and few formal skills," and the report notes "If the jobs won't be created by either the public or private sector, then poor people will have to create the jobs themselves."

(2008) "The [Youth Anti-Drug Media] Campaign’s Media Match program has generated more than $1.22 billion in incremental media value for the Media Campaign since its inception. During FY 2008, the advertising contractor was able to negotiate more than the one-for-one match requirement. Interactive and Radio media placements generated the greatest additional impact for the Campaign by providing more than 10% above the match requirement."

The 2008, 2009, and 2010 budgets for the National Youth Anti-Drug Media Campaign were respectively $60 million (Final), $70 million (Enacted), and $70 million (Requested). For all years since inception, Congressional appropriations for campaign total more than $1.7 billion.

(2006) "As part of the Treasury and General Government Appropriation Act of 1998,⁷the Drug Free Media Campaign Act of 1998 required, among other things, the Office of National Drug Control Policy to conduct a national media campaign for the purpose of reducing and preventing drug abuse among young people in the United States.⁸"

"From fiscal year 1998 through fiscal year 2004, Congress appropriated $1.225 billion to support the campaign (table 1)"

"For fiscal year 2007, the President’s budget requested $120 million for campaign activities. The 2007 request represents an increase of $21 million above the fiscal year 2006 budget authority."